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FOR FURTHER INFORMATION CONTACT:

Initiation of Investigation

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are references to the provisions codified at 19 CFR part 351 (2000).

The Petition

On February 28, 2001, the Department of Commerce (the Department) received the petition filed in proper form by the following parties: PPG Industries, Inc., Safelite Glass Corp. and Apogee Enterprises, Inc. The Department received from petitioners information supplementing the petition throughout the 20-day initiation period. On March 13, 2001, Fuyao Glass Industry Group Co., Ltd., a Chinese producer and exporter of the subject merchandise, and its wholly-owned subsidiary, Greenville Glass Industries, Inc. (Greenville Glass), a U.S. importer of the subject merchandise, provided comments regarding whether petitioners have established industry support pursuant to Section 732(c)(4)(E) of the Act.

In accordance with section 732(b) of the Act, petitioners allege that imports of automotive replacement glass windshields (ARG windshields) from the People's Republic of China (PRC) are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that such imports are materially injuring an industry in the United States.

The Department finds that petitioners filed this petition on behalf of the domestic industry because they are interested parties as defined in section 771(9)(C) of the Act and have demonstrated sufficient industry support with respect to the antidumping duty investigation of automotive replacement glass (ARG) windshields that they are requesting the Department to initiate (see Determination of Industry Support for the Petition section below).

Scope of Investigation

For purposes of this investigation, the products covered are imports of ARG windshields, and parts thereof, whether clear or tinted, whether coated or not, and whether or not they include antennas, ceramics, mirror buttons or VIN notches, and whether or not they are encapsulated. ARG windshields are laminated safety glass (i.e., two layers of (typically float) glass with a sheet of clear or tinted plastic in between (usually polyvinyl butyral)), which are produced and sold for use by automotive glass installation shops to replace windshields in automotive vehicles (e.g., passenger cars, light trucks, vans, sport utility vehicles, etc.) that are cracked, broken or otherwise damaged.

ARG windshields subject to this investigation are currently classifiable under subheading 7007.21.10.10 of the Harmonized Tariff Schedules of the United States (HTSUS). Specifically excluded from the scope of this investigation are automotive windshields sold for original equipment manufacturers (OEM) (i.e., automobile manufacturers). While HTSUS subheadings are provided for convenience and Customs purposes, our written description of the scope of this investigation is dispositive.

During our review of the petition, we discussed the scope with the petitioner to ensure that it accurately reflects the product for which the domestic industry is seeking relief. Specifically, we have discussed with petitioners whether it is possible to develop descriptive language that would permit a distinction between ARG and OEM windshields based on the physical characteristics of the product. Because it is not clear whether specific standards, specifications, or quantifiable differences in tolerances can be used to distinguish ARG from OEM windshields, we are requesting all interested parties to comment on how the scope definition might be refined to describe more clearly ARG windshields, and which will enable U.S. Customs officials to distinguish between OEM and ARG windshields. For example, the Department would consider the construction of scope language which would allow for exclusion based on the presence of an OEM logo (e.g., GM, Ford, Toyota, etc.) on the windshield. Alternatively, exclusion from the scope of the order may be established through the presence of documentation demonstrating that the OEM customer has certified the foreign producer as a supplier of a particular model. Thus, as discussed in the preamble to the Department's regulations (62 FR 27323), we are setting aside a period for parties to raise issues regarding product coverage. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of the preliminary determination. Therefore, the Department encourages all parties to submit such comments by April 9, 2001. Comments should be addressed to Import Administration's Central Records Unit at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

Determination of Industry Support for the Petition

Section 771(4)(A) of the Act defines the “industry” as the producers of a domestic like product. Thus, to determine whether the petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (ITC), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not Start Printed Page 16652render the decision of either agency contrary to the law.[1]

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition. Moreover, petitioners do not offer a definition of domestic like product distinct from the scope of the investigation.

In this case, the domestic like product referred to in the petition is the single domestic like product defined in the “Scope of Investigation” section above. As discussed below, on March 13, 2001, the Department received comments on industry support from Fuyao Glass Industry Group Co., Ltd. and Greenville Glass Industries Inc., a U.S. importer of subject merchandise (collectively “FYG”). While we have addressed FYG's comments below, we note that, in essence, FYG argues that the domestic like product includes glass windshields manufactured for OEM customers.

Concerning whether windshields for OEM customers are part of the same domestic like product as ARG windshields, we have considered such factors as the similarities of manufacturing processes, pricing bases, marketing methods, and applications. With regard to the manufacturing process, petitioners have noted that the design and testing stages for OEM customers are lengthy processes (i.e., up to three years). In contrast, the entire time to design, test, and produce an ARG windshield is much shorter, typically requiring as little as 12 weeks or less. Moreover, because many ARG windshields are “reverse engineered”, the ARG windshields cannot, and do not, meet the same specifications and tolerances as the OEM windshields. Also, according to discussions with the U.S. International Trade Commission, the sheet of clear or tinted plastic in between the glass (e.g., polyvinyl butyral) is usually applied by machine in the production of OEM windshields, while it is normally applied by hand for the manufacture of ARG windshields. Finally, petitioners note that the vast majority of OEM windshield part numbers and ARG windshield part numbers are produced in different production facilities with different workers. Petitioners also state that OEM windshields are produced on high volume production equipment, with much longer production runs than is the case for ARG windshields.

Petitioners state that ARG windshields are typically more expensive than OEM windshields, based primarily on their shorter production runs and the need to keep low volume parts in stock, both of which reduce the economic efficiencies of producing ARG windshields.

Marketing methods are clearly different, due to the fact that the customers to whom ARG and OEM windshields are sold are likewise different. OEM windshields are sold to a relatively small universe of customers (i.e., auto manufacturers). The market for ARG windshields, in contrast, is comprised of thousands of retail service shops that install replacement windshields in cars and light trucks. Thus, ARG windshields are produced for sale to distributors and auto glass installation shops who, in turn, sell to consumers and auto insurance companies.

With regard to similarity of applications, our research indicates that while OEM windshields may be sold in the ARG market (e.g., in the event of production overruns on the part of the OEM windshield manufacturer) for use as replacement glass, the reverse is not true: ARG windshields are not used by OEM customers.

In summary, the Department has no basis on the record to find the petition's definition of the domestic like product to be inaccurate. The Department has, therefore, adopted the domestic like product definition set forth in the petition.

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (1) at least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Finally, section 732(c)(4)(D) of the Act provides that if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the administering agency shall: (i) poll the industry or rely on other information in order to determine if there is support for the petition as required by subparagraph (A), or (ii) determine industry support using a statistically valid sampling method.

In order to estimate production for the domestic industry as defined for purposes of this case, the Department has relied upon not only the petition and amendments thereto, but also upon “other information” it obtained through research and which is attached to the Initiation Checklist (See Import Administration AD Investigation Initiation Checklist (Initiation Checklist), Attachment I: Industry Support, March 20, 2001). Based on information from these sources, the Department determined, pursuant to section 732(c)(4)(D), that there is support for the petition as required by subparagraph (A). Specifically, the Department made the following determinations. Petitioners established industry support representing over 50 percent of total production of the domestic like product. Therefore, the domestic producers who support the petition account for at least 25 percent of the total production of the domestic like product, and the requirements of section 732(c)(4)(A)(i) are met. Furthermore, the domestic producers who support the petition account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for or opposition to the petition. Thus, the requirements of section 732(c)(4)(A)(ii) are also met.

Accordingly, the Department determines that the petition was filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act. See Initiation Checklist.

As noted above, on March 13, 2001, FYG submitted comments regarding industry support. Specifically, FYG argues that the proposed scope of this investigation is flawed because it differentiates scope and non-scope merchandise based on customer type/channel of distribution (i.e., OEM versus ARG windshield customers). To eliminate that distinction, FYG argues that all automotive glass windshields, whether OEM or ARG, should be included in the scope. Therefore, FYG argues that the Department should base industry support on U.S. production of all automotive glass windshields. Based on data regarding light vehicle production in the United States (which show that U.S. consumption of auto glass for OEM customers exceeds the entire U.S. consumption of auto glass for replacement glass customers), FYG asserts that it is very possible that Start Printed Page 16653petitioners' standing levels could be “cut in half”. FYG concludes that in order to determine whether petitioners have the requisite support, the Department should poll the entire U.S. auto glass manufacturing industry and extend the period for initiation.

The Department notes that FYG has not asserted that industry support does not exist given petitioners' definition of the domestic industry; instead, FYG has taken issue with petitioners' definition of the domestic industry itself. However, as fully discussed above, the Department believes that there exists a distinct automotive replacement glass windshield domestic industry. Therefore, it would be improper to include U.S. production of OEM windshields in the calculation of industry support, as such production does not pertain to the domestic like product. For this reason, we disagree with FYG that petitioners have not demonstrated industry support.

U.S. Price and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department based its decision to initiate this investigation. The sources of data and deductions and adjustments relating to U.S. price and factors of production (FOP) are detailed in the Initiation Checklist. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate. The period of investigation (POI) for this case is July 1, 2000 to December 31, 2000.

This investigation involves a non-market economy (NME), and the Department presumes, based on the extent of central government control in an NME, that a single dumping margin, should there be one, is appropriate for all NME exporters in the given country. See, e.g., Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the PRC, 59 FR 22585 (May 2, 1994). In the course of this investigation, all parties will have the opportunity to provide relevant information related to the issues of a country's NME status and the granting of separate rates to individual exporters.

United States Price

Export Price

Petitioners calculated export price for integrated and non-integrated Chinese producers using official U.S. IM-145 import statistics for HTSUS category 7007.21.10.10. Petitioners assert that this category contains only imports of ARG windshields, based on petitioners' understanding that no Chinese producers are currently supplying OEM customers in the United States. Petitioners used the free alongside ship (FAS) per-square-meter value for the period July 1, 2000 through December 31, 2000 as the export price. Petitioners made no deductions to this price.

Constructed Export Price

Petitioners calculated constructed export price (CEP) using two sources: a price list from China Southern, and a price list from FYG.

China Southern

Petitioners based CEP on a price list from China Southern for the first sale of ARG windshields to an unaffiliated U.S. customer. Petitioners calculated net prices by deducting discounts, international freight, insurance and charges (CIF charges), U.S. customs duties, U.S. commissions and U.S. inland freight charges.

Petitioners based a 7 percent discount rate for China Southern on a 1999 catalogue and price list from Shenzhen Benxun, a subsidiary of China Southern. Petitioners based U.S. inland freight charges for China Southern on PPG's experience for truckload shipments of ARG windshields to its distributors.

In calculating CIF charges for China Southern, petitioners calculated the per-square-meter CIF charges for China on a monthly basis during the POI by applying the ratio of the total CIF charges to the total customs FAS value to the per-square-meter FAS value of entries of the subject merchandise as reported on the ITC data web (www.usitc.gov.). Similarly, petitioners obtained the per-square-meter amount of U.S. duty by multiplying the percentage duty rate of 4.9 percent by the per-square-meter FAS value of entries of the subject merchandise as reported on the ITC data web.

Petitioners based a commission fee for China Southern on an affidavit from one of petitioners' company officials explaining his knowledge of trade industry practices.

FYG

Petitioners similarly calculated CEP for FYG based on a price list from FYG to an unaffiliated customer in the United States. Petitioners calculated CEP by deducting CIF charges, U.S. customs duties, U.S. selling expenses and U.S. inland freight charges.

Petitioners calculated CIF and duty charges for FYG using the same methodology utilized for China Southern (see above), with one exception. Specifically, petitioners estimated U.S. selling expenses for FYG based on the actual selling expense experience of one of the U.S. producers of the subject merchandise.

Normal Value

Petitioners assert that the PRC is an NME country, and note that in all previous investigations the Department has determined that the PRC is an NME. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Bulk Aspirin From the People's Republic of China, 65 FR 33805 (May 25, 2000). The PRC will be treated as an NME unless and until its NME status is revoked. Pursuant to section 771(18)(C)(i) of the Act, because the PRC's status as an NME remains in effect, petitioners estimated the dumping margin using an NME analysis.

For normal value (NV), petitioners based the FOP, as defined by section 773(c)(3) of the Act, on the consumption rates of PPG Industries, a U.S. producer of the subject merchandise. Petitioners assert that information regarding Chinese producers' consumption rates is not available, and that the U.S. producer employs a production process which is similar to the production process employed by one of the largest producers of windshields in the PRC. Thus, petitioners have assumed for purposes of the petition that producers in the PRC use the same inputs in the same quantities as petitioners use. Petitioners provided separate normal values for integrated and non-integrated producers, based upon whether the float glass is purchased or self-produced. Based on the information provided by petitioners, we believe that their FOP methodology represents information reasonably available to petitioners and is appropriate for purposes of initiating this investigation.

Petitioners assert that India is the most appropriate surrogate country for the PRC, claiming that India is: (i) A market economy, (ii) a significant producer of comparable merchandise, and (iii) at a level of economic development comparable to the PRC in terms of per capita GNP. Based on the information provided by petitioners, we believe that petitioners' use of India as a surrogate country is appropriate for purposes of initiating this investigation.

In accordance with section 773(c)(4) of the Act, petitioners valued FOP, where possible, on reasonably available, public surrogate data from India.

Industry Practices

ARG windshields are produced by both integrated and non-integrated producers. Integrated producers produce ARG windshields in a two-step Start Printed Page 16654process, the first of which is to produce the float glass in its own manufacturing step, and then to use the glass that it produced as one material input into the step of producing the ARG windshields. Non-integrated producers purchase float glass as a raw material input into the process of making ARG windshields. Consequently, petitioners provided separate normal value calculations for integrated and non-integrated producers of the subject merchandise.

Float Glass

For non-integrated producers: Petitioners valued colored float glass using a publicly available 1999 price of float glass purchases by Asahi Safety Glass (Asahi) inflated to the month of March 2000, the last month for which annualized data are published based on the Indian wholesale price index (WPI) as reported in the International Financial Statistics. Petitioners then applied the yield factor experienced by PPG for float glass to obtain a yielded material value for the float glass in U.S. dollars.

For integrated producers: Petitioners provided the batch composition usage and yield loss rate of PPG Industries to produce float glass used in ARG windshields. Petitioners valued each of the material inputs using the published imports statistics of India for April 1998 through May 1999, and inflated the resulting figures to the month of March 2000 using the Indian WPI as reported in the International Financial Statistics. The values in rupees were converted to U.S. dollars using the exchange rate for March 2000, as reported by the Federal Reserve Board. Petitioners could not locate a surrogate value for rouge, one of the minor elements included in the batch composition for float glass. Therefore, petitioners relied on PPG's cost for this factor.

Petitioners used PPG's experience to determine the usage rates for labor and energy per ton of glass production. Petitioners valued electricity using prices published in Energy Prices and Taxes, First Quarter 2000, published by the OECD International Energy Agency. Petitioners applied the value of natural gas recorded in the Department's Index of Factor Values, (http://ia.ita.doc.gov/​factorv/​prc/​energy.htm), and inflated it by the change in the India WPI to March 2000. Petitioners valued oxygen using Indian import statistics, inflated to March 2000 using the Indian WPI reported in International Financial Statistics, and converted to U.S. dollars.

Because petitioners' surrogate value for factory overhead was obtained from two non-integrated producers of automotive glass windshields, petitioners applied a factory overhead surrogate value for float glass production in calculating normal value for integrated producers. Specifically, for factory overhead, petitioners used information from an Indian producer of float glass, Floatglass India Ltd.

Polyvinyl Butyral (“PVB”) and Other Materials

Petitioners valued PVB, as they did float glass for non-integrated producers, using publicly available information regarding 1999 float glass purchases by Asahi, inflated to the month of March 2000 based on the Indian WPI as reported in the International Financial Statistics. The value of PVB in rupees was converted to U.S. dollars using the exchange rate for March 2000, as reported by the Federal Reserve Board. Petitioners then applied the yield factor experienced by PPG for PVB.

Petitioners valued paint, PVB frames, and attachments such as mirrors and antennae, using PPG's costs, and applying an amount for labor and overhead as they did for float glass and PVB for non-integrated producers. However, we have disregarded petitioners' valuation of these items because petitioners failed to provide surrogate value information for them or to adequately demonstrate that such information was not reasonably available. We note that the disallowance of attachment hardware has no impact on the highest margins for both China Southern and FYG calculated by petitioners, since the highest margins calculated by petitioners did not include attachments.

For the Assembly and Production of ARG Windshields

Petitioners valued labor using the regression-based wage rate for the PRC provided by the Department, in accordance with 19 CFR 351.408(c)(3) (http://ia.ita.doc.gov/​wages/​98wages/​gdp00web.htm). Petitioners divided PPG's manufacturing experience with the time required to produce one windshield by 1.28, the average number of square meters of glass per windshield, to arrive at a labor cost per-square-meter of windshield.

For energy, petitioners used PPG's manufacturing experience as factor values for electricity and natural gas. Petitioners valued electricity using prices published in Energy Prices and Taxes, First Quarter 2000, published by the OECD International Energy Agency. Petitioners valued natural gas using the price of natural gas recorded in the Department's Index of Factor Values (http://ia.ita.doc.gov/​factorv/​prc/​energy.htm).

For factory overhead, selling, general and administrative (SG&A) and profit, petitioners applied rates derived from the financial statements of Asahi and Atul Glass Industry Limited (Atul), two of India's largest producers of ARG windshields.

Petitioners expressed the weighted-average factory overhead of the two companies as a percentage of materials and energy expenses, and applied it to the total factor values for materials and energy used in the production of ARG windshields. Similarly, they applied the ratio of SG&A expenses expressed as a ratio of materials and energy expenses to the total factor values for materials and energy used in the production of ARG windshields. Petitioners also applied the weighted-average profit margin of the two Indian windshield producers to the total of materials, energy, labor, factory overhead and SG&A expenses.

For packing, petitioners estimated packing materials usage based on the expert judgement of PPG employees who examined detailed drawings of standard export packing for Chinese ARG windshields. Petitioners valued wood using the published imports statistics of India for April 1998 through March 1999, and inflated the resulting figures to the month of March 2000 using the Indian WPI as reported in the International Financial Statistics. Petitioners used their own costs, however, to value dunnage. We have disallowed this valuation for dunnage because petitioners did not sufficiently demonstrate that surrogate value information from any potential surrogate country was not reasonably available.

To recalculate petitioners' margins, we recalculated normal value without the cost of minor materials such as paint, PVB frames and minor materials, and dunnage for packing. We recalculated the margins for the highest-margin and lowest non-de minimis-margin products without hardware attachments for both FYG and China Southern. We determined the simple average of the difference between the submitted and revised margins for these products for each company, and subtracted the result from the report highest and lowest non-de minimis margin for each company to arrive at a revised highest and lowest non-de minimis margin for each company.

Based upon the comparison of CEP to CV, petitioners' calculated estimated dumping margins, as adjusted by the Department, ranged from 9.59 to 132.12 percent. Start Printed Page 16655

Fair Value Comparisons

Based on the data provided by petitioners, there is reason to believe that imports of ARG windshields from the PRC are being, or are likely to be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

Petitioners allege that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the imports of the subject merchandise sold at less than NV. Petitioners contend that the industry's injured condition is evident in the declining trends in net operating profits, net sales volumes, profit-to-sales ratios, and capacity utilization. The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, lost sales, and pricing information. We have assessed the allegation and supporting evidence regarding material injury and causation, and have determined that this allegation is properly supported by accurate and adequate evidence and meets the statutory requirements for initiation (Initiation Checklist, Attachment II Re: Material Injury).

Initiation of Antidumping Investigation

Based upon our examination of the petition on ARG windshields, and petitioners' responses to our supplemental questionnaires clarifying the petition, we have found that it meets the requirements of section 732 of the Act. Therefore, we are initiating an antidumping duty investigation to determine whether imports of ARG windshields from the PRC are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended, we will make our preliminary determination no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of this petition has been provided to the representative of the government of the PRC.

International Trade Commission Notification

We have notified the ITC of our initiation, as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will determine, no later than April 16, 2001, whether there is a reasonable indication that imports of ARG windshields from the PRC are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination will result in the investigation being terminated; otherwise, this investigation will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act. Effective January 20, 2001, Bernard T. Carreau is fulfilling the duties of the Assistant Secretary for Import Administration.